Death and taxes in 2013 -- the looming federal estate tax change

Estate tax, inheritance tax and death tax all mean the same thing. Before any of your wealth can be distributed to your heirs, your favorite Uncle Sam would like to collect his “fair” share. Barring any surprise action by Congress before the end of this year, the federal estate and gift tax exemptions are scheduled to roll back to 2001 levels effective January 1, 2013. During 2012 the federal estate and gift tax exemption amount is $10.24 million per married couple and $5.12 million for a single person with a maximum marginal rate of 35%. But in 2013 the lifetime exemption amount will drop to $1 million per person or $2 million per married couple with a maximum marginal rate of 55%.
So what does this mean you ask? This means that if you are a family with a net worth of $2 million or more, there's not much time left this year for you to capitalize on estate planning strategies that could reduce or altogether eliminate your potential estate tax liability.
Some strategies you might explore include the creation of trusts like GRAT's1, QPRT's2 and ILIT's3 (funded with life insurance). Fully funding or “front loading” a 529 college savings plan is another approach used to remove assets from your taxable estate.
The federal estate tax is here to stay – at least for the foreseeable future. Employing the right mix of planning techniques can mean a world of difference to the legacy you leave behind.
Footnotes:
1) Grantor Retained Annuity Trust

2) Qualified Personal Residence Trust

3) Irrevocable Life Insurance Trust

Michael Primerano, CFP is a partner and Director of Insurance Services with Cedar Brook Financial Partners, an independent wealth management firm that works with clients on their investments as well as a diverse range of other customized financial services.
Securities offered through Securities America, Inc., Member FINRA (www.finra.org) / SIPC (www.sipc.org). Advisory services offered through Securities America Advisors, Inc. Cedar Brook Financial Partners, LLC and Securities America are unaffiliated. Securities licensed in: FL, OH. 5585 Landerbrook Dr., Ste. 200, Cleveland, OH 44124. Securities America and its representatives do not provide tax or legal advice; therefore it is important to coordinate with your tax or legal advisor regarding your specific situation.

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